Final answer:
In insurance, adverse selection describes the tendency of those with higher risks to purchase insurance more often than those with lower risks. Moral hazard arises when people or businesses are less cautious because they have insurance, knowing the insurer will bear the costs of their riskier behavior.
Step-by-step explanation:
In the business of insurance, a hazard often refers to something that increases the chance or potential severity of a loss. However, the term you're asking about, 'the tendency of poorer risks to seek insurance more often than better risks,' is described as adverse selection, not as a hazard. Adverse selection occurs when individuals who perceive a high risk of an unpleasant event are more likely to purchase insurance than those who perceive a lower risk, potentially skewing the insured population towards higher risks.
Moral hazard, on the other hand, describes the phenomenon where an individual or business might engage in riskier behavior because they have insurance coverage. With the knowledge that their insurer will bear the financial consequences of certain actions, the insured party may not be as cautious as they would be without the coverage. An example is a business that opts for minimal security measures because they have theft insurance, as opposed to the more comprehensive systems they might install if they were uninsured.